Teaching Our Kids the Financial Facts of Life

Every parent wants to support his or her child’s dreams and aspirations. Most have worked hard to provide their children with the best of everything—access to a quality education, exposure to a variety of experiences and cultures, and, yes—the ability to enjoy creature comforts we couldn’t even fathom at their age. I don’t believe you should feel guilty for trying to enrich the lives of your offspring. But to put it bluntly, many of us have spoiled our kids and have not prepared them for the real world. That’s why today’s harsh economic climate offers an invaluable opportunity to deliver life lessons they will not learn in the classroom.
The first lesson: give them a greater appreciation for the value of money in this tight economy. Too often we feel the need to shelter our children from the challenges we face—including the sacrifices that make it possible for them to live in a comfortable home or attend the best schools. Share the importance of budgeting as well as the folly of wasteful spending. And by all means, do not become a human ATM, accommodating every whim—a point I’ve repeatedly made clear to my four teenagers.
As part of the second lesson, encourage them to be active participants in their own future growth and development. For instance, these young, able-bodied men and women shouldn’t view summer months as a time of fun and frolic. During their break, they should climb out of bed early each morning to work at internships, gaining experience in their chosen profession, or at jobs earning money to help pay for a portion of their social activities.
The third lesson is one that has been lost on many professionals of our generation: Do not let your success be measured by material possessions. Unlike our parents—a number of whom grew up during the Great Depression—some of our peers used access to easy credit to borrow a lifestyle. In some cases, they tapped home equity lines of credit to finance lavish vacations, expensive cars, and posh Sweet 16 parties—anything to outshine the Joneses. So our children will not follow this same disastrous path, be candid about the dangers of poor credit management. Tell them such mistakes come with severe consequences. Instead of finding joy in conspicuous consumption and frivolous behavior, our children must learn that lasting value is a byproduct of education, character, reputation, and achievement.
The last lesson is critical. Teach your kids that dirty four-letter word: save. Push them to squirrel away every available dollar for, among other events, rainy days and that down payment on their first home. Find creative ways to help them develop financial discipline. I was extremely fortunate that my father set me on this course when I turned 13. He set up a small investment account for me at a local brokerage and told me by year’s end he would match any sum I amassed through my savings, earnings, or investments. In my attempt to meet this challenge, I gained an appreciation for the value of compounding, the importance of research in stock selection, and an education about the financial markets. By the way, my father was pleasantly surprised by the dent I put in his wallet by the end of that year. If our children took a similar approach to saving and investing today, they’d not only build a considerable nest egg over time but enter the formative stages of creating multigenerational wealth.
If we truly do our jobs as parents, we can place our children on the road to prosperity. Teaching them these new facts of life will give us all comfort that we have protected our most valuable asset: our children’s future.